We propose to study the effects of California's Program Realignment legislation on expenditures and service use in California's 59 County mental health programs. Enacted in July of 1991, the intent of the legislation was to encourage a less costly and more effective mental health system by allowing counties greater discretion over the financing and programming of services. The proposed research will test three specific questions related to the legislation: 1) How has Program Realignment affected overall expenditures on mental health services by county governments? 2) How has Program Realignment affected the allocation of funding among mental health services within counties? and 3) How has privatization of mental health services affected shifts in mental health expenditures and service use as a result of Program Realignment? The study will use eight fiscal years of data from 59 county mental health programs in a "prepost" design. The data are from the California DMH and use the county as the unit of analysis. The study team is complemented by collaborators from the Department of Mental Health and the Mental Health Directors Association of California who form an Advisory Group to this project. The involvement of policy makers from the state and community- levels have significantly enhanced the policy relevance of this proposal and provide an effective-avenue for dissemination of our results. We anticipate that the results of this research will provide empirical data testing theory and public policy in the area of financial decentralization and will contribute to our knowledge of the effects of decentralizing policies on a variety of social and ethnic groups.